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vaieri [72.5K]
3 years ago
7

Using the tables above, if an investment is made now for $20,000 that will generate a cash inflow of $8,000 a year for the next

4 years, what would be the net present value (rounded to the nearest dollar) of the investment, (assuming an earnings rate of 10%)?a. $25,360 b. $5,360 c. $4,296 d. $352
Business
1 answer:
Allushta [10]3 years ago
8 0

Answer:

b. $5,360

Explanation:

Using a financial calculator with CF function, find the Net present value (NPV) of this projects cashflows;

Initial investment; CF0 = -20,000

Yr 1 cash inflow; C01 = 8,000

Yr 2 cash inflow; C02 = 8,000

Yr 3 cash inflow; C03 = 8,000

Yr 4 cash inflow; C04 = 8,000

and annual interest rate; I/Y = 10%

then compute net present value; CPT NPV = 5,358.924

Therefore, the NPV will be closest to $5,360

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This refers to the value which is given to a certain venture or business in order to yield profit after a period of time.

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Dr Merchandise Inventory

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